Growth In Banking Frauds And Measures Taken By RBI To Prevent Them

The financial and banking sectors have undergone significant changes in recent years due to digitalization and the introduction of new products and services. Amid this progress, banking frauds have surged significantly. According to the Reserve Bank of India’s (RBI) Report on Trends and Progress in Banking 2023-24, while the number of frauds continues to rise annually, the monetary value involved has shown a downward trend.

Number Of Frauds In Last Five Years:

In the financial year 2023-24, around 36,066 frauds were reported, nearly three times the number recorded in 2022-23, involving Rs 13,174 crore.

• The highest number of frauds occurred in the cards and internet banking categories.

• The largest monetary losses were linked to loan and advance-related frauds.

• Private sector banks accounted for 24,210 cases, representing 67.1 per cent of the total frauds in terms of numbers.

• Public sector banks led in terms of value, with frauds amounting to Rs 10,507 crore, about 75.3 per cent of the total amount.

While the monetary value of frauds declined in FY 2023-24 compared to the previous year, it increased significantly in 2024-25, with an almost 80 per cent rise to Rs 19,748 crore as of September 2024 compared to Rs 11,017 crore for the entire FY 2023-24.

Banking Frauds Over Last Five Years

Source: RBI

Measures Taken By The RBI In 2024:

Fraudsters predominantly use digital tools to defraud people. This led RBI to take several initiatives to enhance awareness and implement distinct measures to prevent fraud from happening.

The RBI's annual report for 2023-24 states, “The Reserve Bank persisted with its efforts to leverage on technology for effective and efficient supervision along with a focus on enhancing cyber security. Sustained efforts were made for further improving customer services as well as strengthening fraud detection mechanisms”.

These measures are to strengthen cybersecurity and prevent fraud and include:

Mulehunter.AI: In the December 2024 monetary policy meeting, RBI introduced MuleHunter.AI, an AI-ML-based fraud prevention tool developed by the Reserve Bank Innovation Hub (RBIH) for banks’ use in identifying mule accounts and taking action on these. MuleHunter has already been piloted in two public sector banks and has shown encouraging results.  

Awareness Material: RBI issued a booklet ‘The Alert Family’, On March 15, 2024, to make people aware of the types of frauds, prevention methods, and common misconceptions about banking services.

Fraud Risk Management Guidelines: It issued the process guidelines for banks in February 2024, for onboarding Aadhaar-enabled Payment Systems (AePS) touchpoint operators and their fraud risk management requirements.

Cybersecurity Enhancements: RBI has been sensitising people against sharing personal information and falling prey to phishing messages, emails, or calls asking for personal documents in the name of KYC updation.

The scams are still happening every day, and as the RBI, banks and other financial institutions are taking measures to make people aware, it is crucial for individuals to heed these warnings and adopt secure practices to safeguard their assets.